7 Reasons Why Rhode Island's Hospitals Face An Uncertain Future

St. Joseph Pension Fund Collapses 

In August, Rhode Island realized its largest pension fund collapse when the orphaned pension fund of St. Joseph Health Services was forced into a receivership.

After months of legal wrangling -- one of the major learnings is that over 2,700 plan members face an uncertain financial future. The receiver has identified that the fund is underfunded by approximately $118 million. The shortfall is a devastating number as the existing fund has less than $90 million,

Fined $1 Million

In October, the Rhode Island Department of Health fined Prime Healthcare -- which has operated Landmark Hospital in Woonsocket and the Rehabilitation Hospital of Rhode Island in North Smithfield -- $1 million dollars for knowingly giving false or incorrect information as it pertains to the Hospital Conversion Act.

According to the Department of Health, it is the largest fine issued by them "in at least the last 30 years."

About the Fine

Prime Healthcare -- Prime's for-profit entity -- has a pending application with the state to transfer the two entities to the Prime Foundation, its not-for-profit entity. 

According to the Consent Agreement signed by all parties, Prime had led the state to believe it would change its status retroactively when the transfer was approved. 

The Department of Health then discovered Prime knowingly transferred the status in 2016, prior to approval. 

Memorial Closes

In December, the Department of Health approved CNE's application to close Memorial Hospital.

The closure led to more than 800 employees losing their jobs.

Care New England's Financials Are Worse than Expected

GoLocal secured key financial documents of Care New England’s (CNE) and those documents unveil that the hospital group continues to struggle financially and miss budget targets even after the closure of Memorial Hospital.

According to documents filed by CNE, the group continues to overspend its budget even after closing Memorial Hospital, “Total expenses for the System were over budget by $10.2 million or 3.4 percent and $23.4 million higher than last year.”

The overspending is just one of the problems facing Care New England and raises more questions about the management and viability of CNE.

According to CNE financial documents, “The System’s cash remains a primary focus of management; overall days cash on hand were 43 days."

In contrast, hospital groups with strong bond ratings have more than one-year of cash on hand. “Standard & Poors Global Ratings has outstanding ratings on 156 health systems of which 142 are included in the median ratios…AA+ rating..Days cash on hand: 426.2 days,” writes Beckers Hospital Review.

The lack of cash on hand is putting tremendous pressure on CNE’s management and is not improving despite the closure of Memorial Hospital.

Pension Shortfall

According to CNE financials, the pension fund is underfunded by over $100 million. The fund did realize substantial gains which mirrored the performance of the stock-market.

Trending the Wrong Way

For FY 2018, even after shedding Memorial, key indicators show that CNE's budgeting and financial performance are flawed, “Inpatient volume for the System (excluding Memorial) through the first quarter was overall unfavorable to the budget…”

More Staff Cuts and Cost Controls

Beyond the layoffs at Memorial -- over 600 employees, overall salaries and wages were reduced. Full-time employees across CNE’s other hospitals were also reduced — Butler, Kent, and Women and Infants all saw cost reductions. 

Merger Between South County Hospital and Westerly Hospital is Off

The negotiations between South County and Yale-New Havens' Westerly Hospital was called off on Tuesday, February 27, 2018. 

“Unfortunately, we were not able to identify a mutually acceptable plan that would meet the needs of our respective communities. “We believe this is the right course at this point in time and we each remain committed to delivering excellent care for the communities we serve," said the two hospitals in a statement.

It is not the last we will hear from Yale-New Haven -- a mega-hospital group headquartered in Connecticut.

Brown and Prospect

In an effort to ward off Partners HealthCare's entrance to the market, Brown and Prospect of California have teamed up. The unlikely alliance between the Ivy League college and the for-profit group is making a strong pitch to keep jobs and local control in RI.

In January, Paxson wrote to the Brown community, "I feel strongly that letting this acquisition [Partners' purchase of CNE] go forward would be wrong for Rhode Island and for Brown. Doing so is likely to lead to specialty healthcare shifting to Massachusetts, impeding access to healthcare for Rhode Islanders and especially for members of the state’s underserved communities. It also would likely increase the cost of care and reduce the ability of Rhode Islanders — consumers, businesses, healthcare workers and policy-makers — to have a voice in how our healthcare system works. If the focal point of Rhode Island healthcare shifts to Boston, excellent physicians (many of them Brown-trained) could be less likely to choose Rhode Island as a place to practice. In addition, the full economic benefits of a strong local academic health system — one that brings in federal grants, generates spin-off companies and creates new jobs in Rhode Island— would be lost, perhaps forever.

Failed Hospital Merger Process

The collapse of the St. Joseph Health Services pension fund unveils that the Hospital Conversion Act review process is flawed. Just three years after Kilmartin approved the merger of CharterCare into Prospect of California, the orphaned pension fund collapsed.

At the time of the agreement in 2014, Kilmartin said, “The transacting parties have worked diligently to provide regulators with the necessary documentation and information throughout this review process to make this decision, a decision I believe is in the best interest of Rhode Island’s healthcare marketplace, the community, the employees, and most importantly, the patients.”

Kilmartin said in his statement, “Conducting a hospital conversion review requires the commitment of a substantial amount of resources for the Office of Attorney General. I commend my staff for the time and careful consideration put into this review process.” Kilmartin's office has refused to respond to questions from GoLocal regarding the collapse of the fund.